144A & Reg S Offerings

144A- Reg S Offerings

Prospectus for 144A and Reg S Bond Offerings

Prospectus.com assists companies worldwide with 144A and Regulation S (Reg S) offerings for both debt and equity.

What is a 144A Note or Bond?

Bonds or notes issued under Rule 144A indicate that the debt securities will only be offered to U.S. based investors.  A 144A offering is considered by many to be one of the more efficient and quickest ways to raise capital outside of the initial public offering space.  144A’s are used to raise hundreds of millions and even billions of dollars in one offering.  Large corporations like Microsoft and Apple, for instance, issue 144A debt, instead of issuing stock or selling additional equity.  In fact, 99% of all 144A offerings are debt offerings, (i.e. notes or bonds being sold).

Rule 144A:
Rule 144A is one of the most popular rules utilized worldwide to raise capital along with the Regulation S or Reg S rule.  144A is a rule adopted pursuant to the U.S. Securities Act of 1933.  It provides a safe harbor from registration for certain private resales of the restricted securities by an investor class known as Qualified Institutional Buyers (“QIBs”).  QIBs are either institutional investors or accredited investors with holdings of at least $100 million in assets.  144A has many features including the length of time one has to hold onto the purchased securities before reselling them, the number of units sold and the methodology employed in the sale.

 

Private Placement Market

There are a plethora of rules and regulations that govern Rule 144A in particular and the private placement market in general.  These include  Regulation D, Rule 504 (raise up to $1 million),Rule 505 (raise up to $5 million) and Rule 506 (raise unlimited amount of capital) as well as Sections 4(a)(2), 3(b) and 3(a)(11) of the Securities Act and the relatively new Rule 506(b) and Rule 506 (c).  There is some overlap between regulations but Rule 144A, which permits the resale of restricted securities to qualified institutional buyers, is generally used for “large” offerings.

Many of these rules, including 144A, offer various exemptions from registrations and do so under the compliance of Section 4(a)(2) of the Securities Act.  For the non-U.S. area of investment that is related to 144A, Regulation S (or Reg S) is the offshore (or outside U.S. or the non-U.S.) investor element.  As opposed to Regulation D offerings that issuers issue both debt and equity, Rule 144A issuers mainly offer debt securities.  The private placement market has features and avenues to raise capital, and 144A and Reg D are the two most popular methods.  Reg D offerings are more common than 144A offerings, mainly because less capital is raised than in a 144A.  In fact, over a trillion dollars is raised annually by Regulation D offerings which is slightly more than capital raised by 144A offerings.

Prospectus

To issue a 144A bond or 144A note, a prospectus must be written.  The prospectus will outline the terms of securities such as the interest payment, the maturity dates, how much the company is raising and other details of the offering.  In additional to a prospectus, or instead of writing a prospectus, one will create and write a private placement memorandum.  This is similar to the prospectus and in many circles the two are interchangeable.

Regulation S

SEC Regulation S (“Reg S”) is similar to the 144A offering only that in the Reg S offering, one offers non-U.S. investors the ability to contribute capital.  If 144A covers the U.S. or American citizenry (it restricts the investor to only U.S. investors), the Reg S covers everything outside the U.S.  It is common for companies to issue both 144A and Reg S securities.  Debt issuance organizations such as the Depository Trust Corporation in the United States, or Euroclear and Clearstream in Europe, offer clearing and settlement services and are some of the most popular places to settle.

Prospectus.com is the global leader in 144A offering documents for both equity and debt securities for both public and private placements.

 

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144A- Reg S Offerings